Silver Health Plan Premiums Didn't Cost Too Much Gold

Some of the Affordable Care Act's most popular plans saw especially small premium hikes this year—and increases could stay low again next year, too, according to a Urban Institute and Robert Wood Johnson Foundation report.

Premiums for the cheapest policies offering mid-range benefits rose by an average of just 2.9 percent this year, according to the report. That's far less than many of the law's critics—and even some of its allies—predicted.

One of the study's authors, John Holahan, said aggressive competition among insurers will likely keep premium increases in check next year, as well.

"I would say they'd be a bit higher next year than this year, but probably not by a lot," he said. "Last year at this time, people were predicting double digit increases, and I definitely don't think there's any reason that will happen."

These lower-than-expected premiums contributed to a decrease in Obamacare's price tag over the next 10 years, which the Congressional Budget Office declared last week to be $849 billion rather than January's projected $1.1 trillion.

The report looked at the lowest-cost "silver" plans in each market—the least expensive plans in the most popular tier of benefits. Nearly 70 percent of people who picked an insurance plan through Obamacare's exchanges selected a silver plan.

Competition among insurers kept premium increases low, the study found. Half of consumers live in an area where the cheapest available plan changed from 2014 to 2015. So while individual plans might have seen bigger premium hikes, other low-cost alternatives became available.

What's more, employer-sponsored insurance has declined since 2000. This has made the exchanges under Obamacare one of the only growth markets for insurers.

"This is an opportunity for these insurers to get more covered lives, and if they're going to do that, then they have to compete fairly aggressively for it," Holahan said.

But none of this is certain.

Cynthia Cox, an associate director at the Kaiser Family Foundation, said that although there are some trends that suggest the continuation of modest premium increases, it really is impossible to know what will happen. Answers will become more available once insurers have more data about the health of their markets and claims made.

"It's really hard to know what's going to happen next year," Cox said. "But one thing these plans will have "¦ is they're going to have more experience."

One looming obstacle to slow growth of premiums is King vs. Burwell. If the plaintiffs win, premiums in federally-established marketplaces are expected to skyrocket by about 35 percent, according to a separate Urban Institute report.

"If they rule in favor of King and people don't get subsidies, then all the good risks are going to leave the market, and all bets are off," Holahan said.

Premiums also could go up if people become unhappy with the limited provider networks included in most plans, a method insurers have used to keep rates low. These have generally consisted of providers willing to accept lower reimbursement rates. And per-person health care costs have been relatively low over the past few years as well, keeping premiums down.

Temporary risk corridors and reinsurance provisions, both protecting insurers in the case they set prices too low, also end after 2016 and most likely will raise premium prices slightly, Holahan added.

The report itself shows a wide variation in premium change rates, both within and between states.

The West fared best over the past year, with premiums increasing by only 1.4 percent. In the Northeast, they increased by 1.8 percent; in the Midwest, by 3.5 percent; and in the South, by 5.4 percent.

In cities, changes in lowest-cost silver plan premiums were often less and the premiums themselves cheaper, and premiums were most often higher in rural areas than the statewide average. The changes in rural areas were a mix of above and below the statewide average change.

Some states had premium changes that were much higher or lower than the the national average based on their particular marketplace circumstances.

New Hampshire, for example, saw a 17.5 percent decrease in the premium of its lowest-cost silver plan, most likely because of competition from four market entrants in 2015. Alternatively, Minnesota's lowest-cost silver plan premium increased by almost 12 percent because of the marketplace exit of the lowest-cost insurer in six of the nine rating regions, as well as large increases in rural areas.

Although Cox said it's impossible to predict the future of the national average change at this point, regional premiums are likely to still undergo "tremendous variation" next year.

"What we're probably going to see is there are still going to be some shifts ... as insurers gain more experience in this market and are able to price more accurately for their enrollees," she said.

This article is from the archive of our partner
National Journal.

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Caitlin Owens is a health care reporter at National Journal. Her work has previously appeared in the Los Angeles Times, The News & Observer and TheCharlotte Observer. She is a graduate of the University of North Carolina at Chapel Hill.